FBAR Quiet Disclosure Criminal Prosecution
The US has recently decided to criminally prosecute an HSBC customer who made a “quiet” disclosure of his foreign bank accounts for the 2003 through 2008 tax years. A “quiet” disclosure is when a taxpayer files amended returns and pay tax for previously unreported offshore income without otherwise notifying the IRS or participating in a voluntary disclosure program.
In this case the taxpayer received approximately $100,000 in income from a partnership that he hid in offshore bank accounts. In October 2009 the taxpayer made a quiet disclosure of the bank account’s existence and reported income earned on funds in the bank account for the 2003 to 2008 tax years. However, the taxpayer failed to report the initial $100,000 of income from the partnership on his amended returns.
After an attempted visit from an IRS special agent the taxpayer again amended his 2006 return to report the initial $100,000 of income, but in the government’s eyes this was too late.
Several legal experts have opined that because the taxpayer did not initially make a full disclosure including the income from the partnership, the US decided to criminally prosecute. Had he made the full disclosure, or disclosed through the government’s voluntary amnesty program, the taxpayer could have avoided criminal prosecution. The taxpayer reached a plea deal and agreed to pay $76,283 in civil penalties (half the maximum value of the foreign account). He also faces up to five years in prison and a $250,000 fine under the criminal charges.
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